Ma Group Final Report

1.
0 COSTING METHOD
The costing method is the strategy used by an organisation to gather cost information
more acceptably. Many firms employ various approaches depending on the type of items
being created. Costing, or cost accounting is a system for determining a company's cost of
production. In contrast to other accounting firms, costing activities are carried out by an
organisation's internal management, which is not visible to clients or institutions from the
outside. Cost accounting has more latitude than other types of accounting because there are
no rigid requirements it must follow. In the costing method, there are a few types: absorption,
historical, marginal, standard, lean, and activity-based.
1.0.1 Activity-Based Costing
ABC (activity-based costing) calculates expenses that allocate overhead and indirect
costs to connected goods and services. In comparison to conventional costing techniques, this
accounting method of costing acknowledges the connection between costs, overhead
activities, and manufactured goods. Our company use this ABC approach to understand the
better trues costs of every product that our company produces. Moreover, ABC is primarily
used in the manufacturing industry since it enhances the reliability of cost data and could
produce nearly actual costs. It is also better to classify the costs incurred by the company
during its production process.
Stated below is activity-based costing method applied on PureNext Company:
1. Direct materials for PureNext laptop (per unit)
Items Price Per Units Needed Calculation Total

Unit
Display Screen RM 60 350 RM 60x350 RM 21,000
Keyboard RM 20 100 RM 20x100 RM 2000
Cooling Fan RM 8 200 RM 8x200 RM 1600
RAM RM 30 450 RM 30x450 RM 13500
Hard disk RM 25 200 RM 25x200 RM 5000
Touch pad RM 40 350 RM 40x350 RM 14,000
1
Battery RM 30 500 RM 30x500 RM15,000
Internal Speaker RM 35 600 RM 35x600 RM 21,000
Total Cost RM 93,100
Maximum Production = 5,000
Cost per unit = RM 93,100 / 5,000
= RM 18.62
2. Direct Labour (Per Year)
Labour Total Salary per month Total salary
Direct Labour 50 RM 1,500 RM 75,000
3. Overhead
Activity cost Cost Driver Driver Quantity

pool
Purchasing RM 30,000 Number 200

materials purchasing
material
Machine RM 20,000 Machine hours 80

maintenance
Store RM 5,500 Number 450

requisition requirement
2
Material RM 10,000 Number of 100
handling purchases
Packaging RM 20,000 Unit produced 5,000
Other RM 30,000 Direct labour 800

hours
Drivers for maximum production is 5,000 units
Activity cost pool Overhead Absorption Rate (AOR)
Purchasing RM 30,000 / 200 number purchasing material = RM 150 per purchase

materials material
Machine RM 20,000 / 80 setup hours = RM 250 per setup hour

maintenance
Store requisition RM 5,500 / 450 number requirement = RM 12.22
Material handling RM 10,000 / 100 number of material handling = RM 100
Packaging RM 20,000 / 5,000 units = 4 per unit
Other RM 30,000 / 800 direct labour hours = RM 37.5 per direct labour
Overhead PureNext Company
Purchasing materials RM 150 x (200 purchase material / 5,000 units) = RM 6
Machine maintenance RM 250 x (80 setup hours / 5,000 units) = RM 4
Store requisition RM 12.22 x (450 number requirement / 5,000 units) = RM 1.10
3
Material handling RM 100 x (100 number of material handling / 5,000 units) = RM
2
Inspection RM 4 x (5,000 unit produce / 5,000 units) = RM 4
Other RM 37.5 x (800 direct labour hours / 5,000 units) = RM 6
Based on all the table that shown above, it is the direct materials and units that needed
in order to produce all of the activities of making PureNext laptop. It stated that the total cost
of making PureNext Laptop is RM 369750 and also present the direct labour of the workers
and the overhead cost.
2.0 OPERATING BUDGET
The operating budget can represent the PureNext company’s income generating activities
which are sales production and finished goods inventories. The aim of the operating budget is
to generate budgeted income statement.
2.1 Sales Budget
The sales analysis is a strategic planning method that help in managing the resources and
revenues based on anticipated sales for the organisation. In order to provide each department
a clearer understanding of their financial position relative to the entire organisation, it takes
previous sales trends and budgets for similar time periods into account. This makes it
possible for firms to accomplish their goals and generate more revenue quickly. A sales
budget is also described as a financial forecast of a business's overall revenue over a specific
time frame.
It concentrates on two factors which is the quantity of items sold and the price at
which they are sold, in order to forecast the company's performance namely sales forecast.
For our company " PureNext Company" have providing budgeted units to be sold for each
quarter of the next year which 2,200 units (Quarter 1), 2,900 units (Quarter 2), 3,300 units
(Quarter 3), and 3,700 (Quarter 4). Our laptop price is RM1,800 to RM2,000 but we assume
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that we are selling our laptop for RM2,000 the coming year. Sales budget are calculated as
Table I below:
PureNext Laptop Company
Sales Budget
For 1 May 2022 until 30 April 2023
Quarter
1 2 3 4 Year
Units 2200 2900 3300 3700 12100
Units selling price (RM) 2,000 2,000 2,000 2,000 2,000
Budgeted sales (RM) 4,400,000 5,800,000 6,600,000 7,400,000 24,200,000
Table 1: Sales Budget
Based on Table 1, budgeted sales in each quarter are different. The ending of year of
sales budget are recorded at RM24,200,000. Each unit are selling at RM2,000 for each
quarter and there were recorded amount of budgeted sales differently for each quarter which
RM4,400,000 (Quarter 1), RM5,800,000 (Quarter 2), RM6,600,000 (Quarter 3), and
RM7,400,000 Quarter 4).
2.2 Production Budget
Once a sales budget has been prepared, a production budget shows how many units
must be produced to meet sales needs and ending inventory requirements. If there were no
beginning or ending inventories, the products to be produced would equal the units sold. The
sales estimate and the anticipated amount of completed goods inventory to be on hand are
combined to create the production budget, which determines the quantity of products that
must be made (usually as safety stock to cover for unexpected increases in demand). In a
material needs planning context, the production budget is generally created for a "push"
manufacturing method.
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As for our PureNext Company, the company policy requires 40% of the next quarter’s
sales in ending inventory and that beginning inventory of our products for the first quarter of
the year was 700. The calculation of the desired ending inventory in units for each quarter of
the year and for the year are as below:
Quarter 1: 40% x 2200 units = 880 units
PureNext Company
Production Budget
Quarter
1 2 3 4 Year
Sales units 2200 2900 3300 3700 12100
Desired ending 880 1160 1320 1480 1480
inventory
Total needs 3080 4060 4620 5180 13580
Less: Beginning (700) (880) (1160) (1320) (700)
Inventory
Units to be 2380 3180 3460 3860 12880
produced
Table 2: Production Budget
According to the production budget calculation above, the number of units to be

produced in the year's ending inventory is 12880, with different numbers recorded for each
quarter: Quarter 1 (2380 units), Quarter 2 (3180 units), Quarter 3 (3460 units), Quarter 4
(3860). In addition, the starting inventory for the subsequent quarters will be the same as the
ending inventory.
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2.3 Direct Materials Purchase Budget
Direct material cost refers to the cost of raw materials used directly in making the product
can be traced directly to the goods or finished goods. The direct material cost is one of the
variable costs used in the production process. It is the cost that is easily traced through the
production process to the final product. Table 3, 4, 5, 6, 7, 8, 9, 10 show the calculation of
direct materials for PureNext Company.
Material - Display screen:
Quarter 1 = 10% x (2380x1) = 238 units
Quarter 2 = 10% x (3180x1) = 318 units
Quarter 3 = 10% x (3460x1) = 346 units
Quarter 4 = 10% x (3860x1) = 386 units
PureNext Company
Direct Materials Purchases Budget
(Display Screen)
Items Quarter
1 2 3 4 Year
Units to be 2380 3180 3460 3860 12880

produced
(x) Direct 1 1 1 1 1
Materials per unit
Production needs 2380 3180 3460 3860 12880
(+) Desired ending 238 318 346 386 386

inventory
7
Total needs 2618 3498 3806 4246 13266
(-) Beginning (200) (238) (318) (346) (200)

inventory
Direct Materials to 2418 3260 3488 3900 13066

be purchase (RM)
Cost per Material 60 60 60 60 60

(RM)
Total Purchase 145,080 195,600 209,280 234,000 783,960

Cost Material
(RM)
Table 3: Direct Materials Purchases Budget (Display Screen)
Material - Keyboard:
Q1: 10% x (2380x2) = 476 units
Q2: 10% x (3180x2) = 636 units
Q3: 10% x (3460x2) = 692 units
Q4: 10% x (3860x2) = 772 units
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PureNext Company
Keyboard
Items Quarter
1 2 3 4 Year
Units to be 2380 3180 3460 3860 12880

produced
(x) Direct 2 2 2 2 2
Materials per unit
(+) Desired ending 476 636 692 772 772

inventory
Total needs 5236 6996 7612 8492 26532
(-) Beginning (200) (476) (636) (692) (200)

inventory

be purchase (RM)

(RM)
Total Purchase 100720 130400 139520 156000 526640

Cost Material
(RM)
Table 4: Direct Materials Purchases Budget (Keyboard)
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Material - Cooling Fan:
Q1: 10% x (2380x2) = 476 units
Q2: 10% x (3180x2) = 636 units
Q3: 10% x (3460x2) = 692 units
Q4: 10% x (3860x2) = 772 units
PureNext Company
Cooling Fan
Items Quarter
1 2 3 4 Year
Units to be 2380 3180 3460 3860 12880

produced
(x) Direct 2 2 2 2 2
Materials per unit
(+) Desired ending 476 636 692 772 772

inventory
Total needs 5236 6996 7612 8492 26532
(-) Beginning (300) (476) (636) (692) (300)

inventory

be purchase (RM)

(RM)
10
Total Purchase 39488 52160 55808 62400 209856
Cost Material
(RM)
Table 5: Direct Materials Purchases Budget (Cooling Fan)
Material – RAM:
Q1: 10% x (2380x2) = 476 units
Q2: 10% x (3180x2) = 636 units
Q3: 10% x (3460x2) = 692 units
Q4: 10% x (3860x2) = 772 units
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PureNext Company
RAM
Items Quarter
1 2 3 4 Year
Units to be 2380 3180 3460 3860 12880

produced
(x)Direct Materials 2 2 2 2 2
per unit
(+) Desired ending 476 636 692 772 772

inventory
Total needs 5236 6996 7612 8492 26532
(-) Beginning (160) (476) (636) (692) (160)

inventory

be purchase (RM)

(RM)
Total Purchase 152280 195600 209280 234000 791160

Cost Material
(RM)
Table 6: Direct Materials Purchases Budget (RAM)
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Material – Hard Disk:
Q1: 10% x (2380x3) = 714 units
Q2: 10% x (3180x3) = 954 units
Q3: 10% x (3460x3) = 1038 units
Q4: 10% x (3860x3) = 1158 units
PureNext Company
Hard Disk
Items Quarter
1 2 3 4 Year
Units to be 2380 3180 3460 3860 12880

produced
per unit
(+) Desired ending 714 954 1038 1158 1158

inventory
Total needs 7854 10494 11418 12738 39798
(-) Beginning (650) (714) (954) (1038) (650)

inventory

be purchase (RM)
13
(RM)
Total Purchase 180100 244500 261600 292500 978700

Cost Material
(RM)
Table 7: Direct Materials Purchases Budget (Hard Disk)
Material - Touchpad
Q1: 10% x (2380x1) = 238 units
Q2: 10% x (3180x1) = 318 units
Q3: 10% x (3460x1) = 346 units
Q4: 10% x (3860x1) = 386 units
PureNext Company
Touchpad
Items Quarter
1 2 3 4 Year
Units to be 2380 3180 3460 3860 12880

produced
(x) Direct 1 1 1 1 1
Materials per unit
(+) Desired ending 238 318 346 386 386
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inventory
Total needs 2618 3498 3806 4246 13266
(-) Beginning (250) (238) (318) (346) (250)

inventory

be purchase (RM)

(RM)
Total Purchase 94720 130400 139520 156000 520640

Cost Material
(RM)
Table 8: Direct Materials Purchases Budget (Touchpad)
Material - Battery
Q1: 10% x (2380x2) = 476 units
Q2: 10% x (3180x2) = 636 units
Q3: 10% x (3460x2) = 692 units
Q4: 10% x (3860x2) = 772 units
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PureNext Company
Battery
Items Quarter
1 2 3 4 Year
Units to be 2380 3180 3460 3860 12880

produced
per unit
(+) Desired ending 476 636 692 772 772

inventory
Total needs 5236 6996 7612 8492 26532
(-) Beginning (200) (476) (636) (692) (200)

inventory

be purchase (RM)

(RM)
Total Purchase 151080 195600 209280 234000 789960

Cost Material
(RM)
Table 9: Direct Materials Purchases Budget (Battery)
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Material – Internal Speaker
Quarter 1 = 10% x (2380x2) = 476 units
Quarter 2 = 10% x (3180x2) = 636 units
Quarter 3 = 10% x (3460x2) = 692 units
Quarter 4 = 10% x (3860x2) = 772 units
PureNext Company
Internal Speaker
Items Quarter
1 2 3 4 Year
Units to be 2380 3180 3460 3860 12880

produced
per unit
(+) Desired ending 476 636 692 772 772

inventory
Total needs 5236 6996 7612 8492 26532
(-) Beginning (450) (476) (636) (692) (450)

inventory

be purchase (RM)
17
(RM)
Total Purchase 167,510 228,200 244,160 273,000 912,870

Cost Material
(RM)
Total direct 1,030,978 1,372,460 1,468,448 1,641,900 5,513,786

materials
purchase cost
Table 10: Direct Materials Purchases Budget (Internal Speaker)
2.4 Direct Labor Budget
The direct labour budget is used to determine how many labour hours will be required
to produce each of the units listed in the production budget. The direct labour budget is
helpful in estimating how many workers will be required to staff the manufacturing area
throughout the budget period. The anticipated total cost of direct labour is calculated by
multiplying the average by the number of hours of direct labour.
PureNext Company
Direct Labor Budget
Quarter
1 2 3 4 Year
Units to be produced 2,380 3,180 3,460 3,860 12,880
x Direct labor time per unit in hours 0.35 0.35 0.35 0.35 0.35
Total hours needed 833 1,113 1,211 1,351 4508

x Average wage per hour (RM) 10 10 10 10 10
Total direct labor cost (RM) 8,330 11,130 12,110 13,510 45,080
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Table 11: Direct Labor Budget
Table 11 shows that the overall direct labour budget was different for each quarter. At the end
of the year, the total direct labour cost was RM45,080. With a wage of RM10 per hour and
0.35 direct labor time for each quarter, the direct labor budget amounts to RM8,330 (Quarter
1), RM11,130 (Quarter 2), RM12,110 (Quarter 3) and RM13,510 (Quarter 4).According to
table 12 in production budget, the units required to be produced for each quarter are 2380,
3180, 3460, and 3860 accordingly. It takes about 0.35 hours to produce a laptop or equivalent
to 21 mins per laptop. While, the average cost of an hour’s wage is RM10.
PureNext Company
Overhead Budget
Quarter
1 2 3 4 Year
Budgeted direct labor hours 833 1113 1211 1351 4508
x Variable overhead rate (RM) 7 7 7 7 7

Budgeted variable overhead 5831 7791 8477 9457 31556
Budgeted fixed overhead 1810 1810 1810 1810 7240
Total overhead (RM) 7641 9601 10287 11267 38796
Table 12: Overhead Budget
Table 12 shows the overhead budget for each quarter. The fixed overhead rate for our quarterly
budget is set at RM1810, and the variable overhead rate is set at RM7. By the end of the year,
RM 21760 was reported as the total budgeted amount for overhead.
2.5 Overhead Budget
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Overhead Budget is prepared to forecast and present all expected manufacturing costs
that the company expects to incur in the coming year. It represents the anticipated cost of
every production cost aside from direct labour and direct material costs. After preparing a
budget for overhead expenses, the overall cost of production can be calculated.
The variable overhead cost for direct labour is set at RM7 per hour. Every quarter, a
fixed overhead cost of RM1810 is estimated. It is also including the amount of RM630 for
depreciation per quarter.
2.6 Ending Finished Goods Inventory Budget
The ending finished goods inventory budget computes the cost of finished goods
inventory at the end of each budget period. It also includes the unit quantity of finished goods
at the end of each budget period, but the true source of that information is the production
budget. Furthermore, the budget for ending finished goods inventory assists managers in
determining the predicted unit cost of production. It is also an important input in preparing
the cost of goods sold budget. This amount is used to value the inventory at the end of the
period on the budgeted balance sheet.
RM RM
Direct materials:
Display screen 60
Keyboard 40
Cooling fan 16
RAM 60
Hard Disk 75
Touch pad 40
Battery 60
Internal Speaker 70 421
Direct labour (0.35 x 10) 3.5
Overhead:
Variable (0.35 x 7) 2.45
20
Fixed (0.35 x 1.61) 0.56 3.01
Total unit cost 427.51
Table 13: The Unit Product Cost
According to table 13 above, the cost of direct material is determined by multiplying

the cost per material by the direct material per unit. The total cost of direct material RM421
and the end of total unit cost is RM427.51.
PureNext Company
Ending Finished Goods Inventory Budget
Laptop 1480
x Unit cost 427.51
Total ending inventory (RM) 632714.8
Table 14: Ending Finished Goods Inventory Budget
As can be seen in table 8, the cost per unit that represents the total unit cost
which is RM 427.51. The total ending of finished goods inventory budget is RM 632714.8,
and result is added of RM 1480 from the ending inventory and unit cost.
2.7 Cost of Goods Sold Budget
The cost of goods sold budget is a budget that determine the predicted cost of units to
be sold in the coming year. It able to predict the direct costs of producing the good sold by
PureNext Company. It is also an important and main input in creating the budgeted income
statement.
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By using the information from direct materials budget, direct labor budget, overhead
budget and ending finished goods budgets, PureNext Company is able to create and
determine the cost of goods sold budget. The cost of beginning finished goods inventory is
RM783954 (200 units x 3919.77).
Direct Material Used
Display screen: 12,880 x 60 = 772,800
Keyboard: 25,760 x 20 = 515,200
Cooling fan: 25,760 x 8 = 206,080
RAM: 25,760 x 30 = 772,800
Hard Disk: 38,640 x 25 = 966,000
Touch pad: 12,880 x 40 = 515,200
Battery: 25,760 x 30 = 772,800
Internal speaker: 25760 x 35 = 901,600
Total Direct cost = 5,422,480
PureNext Company
Cost of Goods Sold Budget
RM
Direct materials used 5,422,480
Direct labor used 45,080
Overhead 38,796
Budgeted manufacturing costs 5,506,356
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Beginning finished goods 500,000
Cost of goods available for sale 6,006,356
Less: Ending finished goods (632,714.8)
Budgeted cost of goods sold 5,373,641.2
Table 15: Cost of Goods Sold Budget
Based on the calculation above, the budgeted cost of goods sold for the coming year are
RM5,373,641.2.
2.8 Selling and Administrative Expenses Budget
The selling and administrative expenses budget is a budget that plan and expect the
expenditures for non-manufacturing activities. Selling and administrative expenses can be
divided into fixed and variable. PureNext Company can determine and plan the amounts to be
spent on the non-production cost with it.
The variable expense is RM0.50 per unit sold. The fixed expenses are following:
RM
Salaries 10,000 per quarter
Utilities 2,000 per quarter
Depreciation 4,000 per quarter
Advertising and promoting
Quarter 1 1,000
Quarter 2 1,200
Quarter 3 1,400
Quarter 4 1,600
PureNext Company
Selling and administrative expenses budget

Quarter
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1 2 3 4 Year
RM RM RM RM RM
Planned sales in unit 2,200 2,900 3,300 3,700 12,100
x Variable expenses per unit 0.5 0.5 0.5 0.5 0.5
Total variable expenses 1,100 1,450 1,650 1,850 6,050
Fixed expenses:
Salaries 10,000 10,000 10,000 10,000 40,000
Utilities 2,000 2,000 2,000 2,000 8,000
Advertising and promoting 1,000 1,200 1,400 1,600 5,200
Depreciation 4,000 4,000 4,000 4,000 16,000
Total fixed expenses 17,000 17,200 17,400 17,600 69200
Total selling and administrative
18,100 18,650 19,050 19,450 75,250
expenses
Table 16: Selling and Administrative Expenses Budget
Based on table 16 above, the total selling and administrative expenses is RM75,250.
2.9 Budgeted Income Statement
The budgeted income statement can be created and plan after the costs of goods sold
and budget the selling and administrative budget are completed. The budgeted income
statement helps PureNext Company determine the profit for the coming year. It is important
because the adjustments can be made to all related budget so that the budget income can be
high and acceptable enough. The tax rate is expected to be 40%.
PureNext Company
Budgeted Income Statement

RM
Sales 24,200,000
Less: Cost of goods sold (5,373,641.2)
Gross margin 18,826,358.8
Less: Selling and administrative expenses (75,250)
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Income before taxes 18,751,108.8
Less: Income taxes (40% x RM18,751,108.8) (7,500,443.52)
Net Income 11,250,665.28
Table 17: Budgeted Income Statement
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2.10 FINANCIAL BUDGET
2.10.1 Cash Budget
PureNext Company
Cash Budget
Quarter 1 Quarter 2 Quarter 3 Quarter 4 Year
Beginning cash 10,000,000 13,334,95 17,723,11 22,813,215 10,000,000

balance 1 0
Sales 4,400,000 5,800,000 6,600,000 7,400,000 24,200,000
Total cash 14,400,000 19,134,95 24,323,11 30,213,215 34,200,000

available 1 0
Less:
Disbursements
Total material (1,030,978 (1,372,460 (1,468,448 (1,641,900) (5,513,786)

) ) )
Direct labour (8,330) (11,130) (12,110) (13,510) (45,080)
Overhead (7,641) (9,601) (10,287) (11,267) (38,795)
Selling and (18,100) (18,650) (19,050) (19,450) (75,250)

administrative
expenses
Income Taxes - - - (7,500,443.5 (7,500,443.

2) 52)
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Total (1,065,049 (1,411,841 (1,509,895 (9,186,570.5 (13,173,355
disbursements ) ) ) 2) .52)
Ending cash 13,334,951 17,723,11 22,813,21 21,026,644.4 21,026,644.

balance 0 5 8 48
Table 18: Cash Budget
The table 18 shows the cash budget of PureNext Company where the opening cash of
year 1 is RM 20000. PureNext Company expect that all the sales are pay in cash and no credit
made. The ending cash balance is increasing rapidly for over four years. The cash balance
increase from RM 13,334,951 in quarter 1 to RM 17,723,110 in quarter 2 and increase to RM
22,813,215 in quarter 3. The amount has reaches RM 21,026,644.48 in quarter 4.
3.0 FUTURE PLANNING
First and foremost, PureNext wants to clarify that the majority of businesses aim to achieve a
high level of customer satisfaction and rate improvement since doing so increases the
probability that those customers would recommend their products and services to others. As
is well known, everyone now uses a laptop in their everyday lives. Demand of the laptop lead
the PureNext company plans to sell 12,100 laptops at RM2,000 each in the coming year
which the sales will be RM24,200,000. Therefore, those satisfied consumers will tell their
friends, family, or relatives about the good opinion or experience they had, which will result
in more customers and expand PureNext's customer base. As a result, a company that sells its
goods to other businesses may find that its ability to provide customer service is crucial to
generating sales from new clients.
Another important issue is that personnel development and training are crucial to PureNext's
future business strategy. The management team or department of the PureNext firm must
handle more diverse jobs and take on greater responsibility as the venture grows and the
company's profits rise. Providing consistent customer service is ensured by employee
training, which helps to foster trust. Additionally, it aids in maximising the potential of your
workforce, reducing employee turnover. The majority of CEOs and HR departments are
aware that they must invest in order to receive all of these benefits. Apart from that, PureNext
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will offer a tonne of academic possibilities for current or senior staff members to improve
their skills and talents as managers. Additionally, PureNext will need each prospective
employee to develop a proposal for their professional growth to make sure their abilities will
be valuable to the business as it expands.
The PureNext firm would do well to develop a good system, so planning and reporting
systems will be put in place. To begin, the PureNext firm's management team or department
will create a business project to offer to possible shareholders or capitalists, as well as to
guide them as they develop the company, such as creating a blueprint in a framework project.
Additionally, when the PureNext firm gets even more powerful, planning efforts will
continue. For instance, consistently compiling information on competitive events and
identifying real outcomes to forecast the amount on at least once each quarter. It can help
PureNext Company with the idea of non-financial success benchmarks, such as retailing
projects or R&D initiatives, by carrying out the business plan.
Additionally, the PureNext firm has raised the importance of clearly communicating
corporate policy and will have its own substantiation customisation and ways. The corporate
philosophy, culture, and expectations of PureNext Company need to be explained to
newcomers, among other things. Due to this, they are able to respond right away and
intervene. When it comes to senior members of the management team, their positions will be
randomly exchanged, and newcomers will take their place in the original position. In order to
advance the growth of the business, newcomers must perform better than senior employees.
Finally, PureNext will do its best by getting involved in a range of community activities in
the future, freeing up time to accomplish worthwhile things, and provide financial assistance,
for instance, to enhance people's quality of life. Additionally, financial assistance includes
financing charitable endeavours and inspiring staff to participate in worthwhile activities.
This would greatly enhance the reputation of PureNext Company, indirectly promote their
goods, and boost customer recognition of the Company.
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4.0 REFERENCE
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https://www.wallstreetmojo.com/overhead-budget/
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%20labor%20budget%20is,this%20information%20by%20labor%20category.
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costing
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1.

1.0.1 Activity-Based Costing

Stated below is activity-based costing method applied on PureNext Company:

1. Direct materials for PureNext laptop (per unit)

Items Price Per Units Needed Calculation Total

Display Screen RM 60 350 RM 60x350 RM 21,000

Keyboard RM 20 100 RM 20x100 RM 2000

Cooling Fan RM 8 200 RM 8x200 RM 1600

RAM RM 30 450 RM 30x450 RM 13500

Hard disk RM 25 200 RM 25x200 RM 5000

Touch pad RM 40 350 RM 40x350 RM 14,000

Internal Speaker RM 35 600 RM 35x600 RM 21,000

Total Cost RM 93,100

Maximum Production = 5,000

Cost per unit = RM 93,100 / 5,000

2. Direct Labour (Per Year)

Labour Total Salary per month Total salary

Direct Labour 50 RM 1,500 RM 75,000

Activity cost Cost Driver Driver Quantity

Purchasing RM 30,000 Number 200

Machine RM 20,000 Machine hours 80

Store RM 5,500 Number 450

Packaging RM 20,000 Unit produced 5,000

Other RM 30,000 Direct labour 800

Drivers for maximum production is 5,000 units

Activity cost pool Overhead Absorption Rate (AOR)

Purchasing RM 30,000 / 200 number purchasing material = RM 150 per purchase

Machine RM 20,000 / 80 setup hours = RM 250 per setup hour

Store requisition RM 5,500 / 450 number requirement = RM 12.22

Material handling RM 10,000 / 100 number of material handling = RM 100

Packaging RM 20,000 / 5,000 units = 4 per unit

Overhead PureNext Company

Purchasing materials RM 150 x (200 purchase material / 5,000 units) = RM 6

Machine maintenance RM 250 x (80 setup hours / 5,000 units) = RM 4

Store requisition RM 12.22 x (450 number requirement / 5,000 units) = RM 1.10

Inspection RM 4 x (5,000 unit produce / 5,000 units) = RM 4

Other RM 37.5 x (800 direct labour hours / 5,000 units) = RM 6

2.0 OPERATING BUDGET

2.1 Sales Budget

PureNext Laptop Company

For 1 May 2022 until 30 April 2023

2.2 Production Budget

Quarter 1: 40% x 2200 units = 880 units

Quarter 2: 40% x 2900 units = 1160 units

Quarter 3: 40% x 3300 units = 1320 units

Quarter 4: 40% x 3700 units = 1480 units

For 1 May 2022 until 30 April 2023

According to the production budget calculation above, the number of units to be

Material - Display screen:

Quarter 1 = 10% x (2380x1) = 238 units

Quarter 2 = 10% x (3180x1) = 318 units

Quarter 3 = 10% x (3460x1) = 346 units

Quarter 4 = 10% x (3860x1) = 386 units

Direct Materials Purchases Budget

For 1 May 2022 until 30 April 2022

Units to be 2380 3180 3460 3860 12880

Production needs 2380 3180 3460 3860 12880

(+) Desired ending 238 318 346 386 386

(-) Beginning (200) (238) (318) (346) (200)

Direct Materials to 2418 3260 3488 3900 13066

Cost per Material 60 60 60 60 60

Total Purchase 145,080 195,600 209,280 234,000 783,960